High demand for AMOLED smartphone panels puts squeeze on supply chain

Increased demand for AMOLED smartphone panels, partly caused by increasing screen size, will put pressure of manufacturing plants to keep up with supply. This make the industry vulnerable to any supply chain kinks.

The stratospheric demand for large display smartphones is putting considerable pressure on the flat panel display industry, and the demand for AMOLED panels in particular means that supply will the tight.

According to a quarterly report by research firm NPD DisplaySearch, the supply/demand ratio expected to fall to 1 percent during Q4 of 2013. This level means there will be little to no slack in the supply chain for any disruptions, which means that any kink, no matter how small, could lead to shortages.

AMOLED smartphone panel shipments are projected to hit 217 million units this year, up from 134 million units in 2012. This, combined with increasing screen sizes, will see AMOLED demand to grow from 263,000 square meters in Q1 2013, to 557,000 square meters in Q1 2014.

"Samsung Display still produces the vast majority of commercially available AMOLEDs, and these are mainly used in smartphones. With the recent release of the Galaxy S4 with a 5-inch full HD AMOLED display, Samsung will need to run its AMOLED fabs at maximum capacity to keep up with expected high demand," stated Charles Annis, Vice President of Manufacturing Research at NPD DisplaySearch.

"As the supply/demand ratio is expected to tighten dramatically, Samsung is moving to significantly extend capacity at its A2 Gen 5.5 fab this year and next. Additionally, the company may also accelerate its plan for A3, another new AMOLED production line," added Annis.

Availability of large-area FPDs (mostly in the form of TFT LCD) is also expected to tighten over the course of the year. As TV prices fall, buyers are buying bigger sets which, in turn, is putting pressure on demand. NPD DisplaySearch predicts that large-area panel supply/demand ration will fall from 21.9 percent in Q1 2013 to 11.8 percent in Q3 2013. This, in turn, will push average fab plant utilization above 85 percent. With TFT panel capacity forecasted to grow by only 4 percent in 2014, with demand forecast to increase by 10 percent, the panel constriction is expected to continue to Q3 2014, when large area FPD supply/demand is projected to fall to a very tight 6 percent.

"Rapid growth of smartphones and tablets, in conjunction with the continued shift towards larger average TV sizes, are driving a recovery of the FPD industry. In Q4 2012, average operating margins for FPD manufacturers turned positive for the first time since Q3 2010, and this trend is forecast to continue. Additionally, the outlook for fab utilization, equipment spending and technology upgrades is improving this year and potentially will continue into 2014,” added Annis.


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